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Abstract

In the wake of the House of Lords decision in Caparo Industries v Dickman there has been some apprehension within the auditing profession that there might be possible alternative liability under section 52 of the Trade Practices Act 1974 (Cth) and associated legislation. Baxt stated shortly after the case that in the absence of common law liability, section 52 ’might well be the way in which individual shareholders will seek to make the auditor liable’. Based on their wide operation in other areas the professional journals have suggested that section 52 and similar provisions of State Fair Trading Acts apply to create strict liability for even honest errors or omissions of auditors. There is particular concern that such strict liability may be owed to a wide range of investors beyond the shareholders of the audited company. These fears are probably unfounded. On the contrary, auditors may be uniquely placed to escape this wide net of liability.

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